It is well known that many new and often controversial businesses, as cannabis, have been lost due to various lawsuits filed by the always dangerous, ever present plaintiff bar. The only protection is of course insurance with adequate limits and well-worded-intentioned policies. This remains an issue for the legal cannabis business. Not all lawsuits are frivolous, but growing product, neglect of new and now changing labor laws, as well as compliance issues with every state being different, the defense/coverage picture remains cloudy.
So, what are the minimum insurance protections the canna industry MUST have? These include but are not limited to: product liability … business partner and unhappy investor expectations … labor law and workplace safety … RICO lawsuits (Racketeer Influenced and Corrupt Organizations) … place of employment safety … FDA and Federal Trade Commission violations. This is why we cover the activities that cannabis businesses must do in conjunction with their insurance brokers, attorneys and compliance companies in this and subsequent issues.
A first step is vigilance for the integrity of products being distributed and the claims made about their health benefits. KannaRiskManagement, the publisher of Kanna Knowledge, has visited growers and dispensaries and purchased all types of products being sold at retail: oils, creams, tinctures and patches. Few, if any, articulate scientific claims about health benefits. But that does not dismiss the possibility, or preclude the effort by a customer who will sue the entity for a lack of disclosure and alleged injury.
There have been far less RICO lawsuits in the last few years largely because many were found to be frivolous. We know that opening in cannabis-friendly locations will be a good idea for the next few years.
Because CBD in hemp is now mostly legal there are many companies advertising its benefits such as: reduced anxiety: less arthritic pain: sleep recovery; digestion improvement and on and on. While there is science to support these and other claims the industry has been lax about using science to verify them on products. There are world-renowned medical doctors/scientists who have written hundreds of articles about CBD efficacy, but the industry has been totally negligent in discussing them for the public’s awareness. The safety issues are legion and well known with overuse. But the proofs of efficacy are there, just not being cited by the industry, which for now is more concerned about sales numbers as new investors press for immediate returns on their capital. When the FDA steps in to promulgate regulations on cannabis sales the industry will become more vocal about the promises of CBD. This will be more extensively discussed in a later issue
In part 2, I will talk about strategies that the industry needs to implement for safety of assets and protection from the plaintiff bar which is just now becoming aware of the enormous assets placed in the cannabis industry.
See you next time … be safe and well…